The falls in oil and fuel forecourt prices has helped to lower production costs, boost household spending power and will increase business investment.
The combination of these effects means that the lower petrol and diesel prices seen through 2015 will have helped to raise UK GDP by between 0.5%-0.6%. Based on Cebr’s current forecasts for growth of 2.4% on average across the year, this suggests that these factors will account for over a fifth of UK economic growth in 2015. Further, the additional £11.6 billion in economic activity generated will help to create 121,000 jobs and boost government tax revenues. In fact, despite lower VAT receipts on fuel, the Exchequer will achieve a net gain of £1.3 billion.
The report also strikes a warning note to the Chancellor in the run up to next week’s Autumn Statement on diesel duty and VED. Any plans to increase tax levies on diesel usage as a reaction to the VW emissions scandal could cost the UK economy over £9 billion in extra taxation over the rest of the current parliament.
Cebr Director, Oliver Hogan said ‘While the continuation of the fuel duty escalator would have brought in additional indirect taxes over the past year, the Government would have been trading off the boost to economic activity and jobs for increased tax revenues. Given the fragility of the economic recovery, this would in hindsight have been an unwise policy.’
FairFuelUK’s campaigner, Quentin Willson, said: ‘This landmark report completely destroys the myth that high fuel duty levels increases government tax receipts. We’ve proved that keeping duty low actually increases revenues into the Exchequer by improved economic activity, more income tax, NI, Corporation Tax and VAT. The government must now do everything in its power to lower fuel duty as well as making sure fuel retailers pass on oil price savings to businesses and consumers. Our future economic strength depends on this policy.’
Howard Cox, co-founder of FairFuelUK said: ‘George Osborne should look at this data very carefully indeed. We’ve provided clear evidence-based proof that lower transport costs of 2015 have significantly benefitted everybody, including the Treasury and there’s now no argument left not to reduce fuel duty. Any plans he may have to penalise drivers for using diesel cars, vans and trucks will backfire badly and hit businesses and families with a shocking £9.3 million bill.’
To read a copy of the report via the FairFuelUK website, please click here.